It can be rather difficult to understand the monthly minimum payment required in your monthly credit card statements. However, there is a mathematical formula used by the lenders who issue credit cards for determining what your monthly minimum payment will be. Many lenders that issue credit cards attract clients in with low introductory interest rates that suddenly go through the roof after that initial trial period is over.

Furthermore, there are various fees to take into consideration such as annual membership fees, finances charges, late fees, and so on along with interest rates that have a tendency to fluctuate. If you have one or more credit cards, all with different fees and varying interest rates it can be difficult to hammer out a monthly budget for yourself based on what your monthly minimum credit card payments will be.


Lenders offer several methods of payments and you can choose depending on your preference. You will either pay a payment based on your average daily balance, your balance based on adjusted payments, charges and interest rates or your previous balance. Each one of these methods has a tendency to favor the card holder, the card issuer or a fair balance between the two. When you are considering applying for a new card or consolidating your balances, or simply trying to figure out how much money you are really supposed to pay every month, it is a good idea to read the small print on your card member statement to determine which method that bank utilizes.

The method that is most beneficial to the consumer or cardholder is the adjusted
balance system. With this formula the credit card providers will add any new charges to your previous monthly balance and subtract payments and then take that sum and multiply it by the monthly interest charge. The resulting total is the minimum amount you
will be required to pay that month.


On the other hand, the system that appears to favor the issuer of the card is known as the previous balance system. With this method the financial institution will multiply the balance from the previous month by the monthly interest payment, regardless of any payments you have made since the prior month. This means that even if you have made a large payment that month, you will still be penalized for the previous month’s balance.

The calculating formula somewhere between the above two methods is known as the average daily balance method. In this system, your average daily balance, which is monthly balance divided by average days in the month, is added to any accrued charges as they occur. Any payments that are made are subtracted. The average of each daily total is calculated and that sum is multiplied by the monthly interest rate.

There is a grace period in which you can make purchases on the card without having to pay an interest. It is not that all card companies allow grace period. To take advantage of a grace period, you must pay your bills totally every month by the due date. But keep in mind that if you have any previous balance outstanding, you will lose the advantage of having a grace period on purchases made in the current month.